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Commodities exchange

Discuss Commodities exchange within the Financial Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade ...

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Sunanda K. Chavan
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Commodities exchange - October 19th, 2010

Commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade in agricultural products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies, oil, metals, etc.) and contracts based on them. These contracts can include spot prices, forwards, futures and options on futures.

Commodities exchanges usually trade in futures contracts on commodities, such as trading contracts to receive something, say corn, in a certain month. A farmer raising corn can sell a future contract on his corn, which will not be harvested for several months, and guarantee the price he will be paid when he delivers; a breakfast cereal producer buys the contract now and guarantees the price will not go up when it is delivered. This protects the farmer from price drops and the buyer from price rises.

Speculators and investors also buy and sell the futures contracts to make a profit and provide liquidity to the system.
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